Xumo Streaming Devices Compel the Sunset of Set-Top Box Rules

The Free State Foundation's recent comments responding to the FCC Office of Economics and Analytics' State of Competition in the Communications Marketplace Public Notice argued that "the Commission should follow its sound decision in September 2020 to terminate the 'unlock the box' navigation device proceeding and announce that the sunset provision set forth in Section 629(e) of the 1996 Act has been satisfied." Comcast's announcement on June 27, 2024, that Xumo streaming devices, which are available for purchase at retail and now support a fourth competing virtual Multichannel Video Programming Distributor (vMVPD), is a more than compelling reason to take that long overdue step.

Enacted nearly three decades ago in a context today wholly unrecognizable, Section 629 sought "to assure the commercial availability … of converter boxes … and other equipment used by consumers to access multichannel video programming … from manufacturers, retailers, and other vendors not affiliated with any" MVPD. The Commission effectively abandoned this misguided effort four years ago, but it stopped short of triggering the sunset provision set forth in subsection (e). Consequently, the regulatory requirement that cable operators make available "separable security" remains on the books (and imposes needless costs).

Source: xumo.com

The Xumo platform, the product of a joint venture that includes Comcast and Charter, provides consumers with access to three of the largest cable services – Comcast's Xfinity, Charter's Spectrum, and Mediacom's Xtream – as well as over 250 third-party apps.

Xumo devices can be obtained directly from these providers (in some cases for free) or – critically – at retail. The Xumo Stream Box can be purchased directly from the Xumo website, while Xumo TVs manufactured by Pioneer, element, and Hisense are available on store shelves at Best Buy, Meijer, and Walmart.

Consequently, the goal of Section 629 – to make it possible for subscribers to purchase a set-top box from a third party rather than lease one directly from their provider – clearly has been achieved. (The longstanding availability of app- and browser-based options to access MVPD services similarly satisfied that objective, notwithstanding the FCC's unwillingness to acknowledge that fact.)

But wait, there's more: not only does the Xumo platform foster device-based competition, it also facilitates service-based competition. As noted above, Xumo devices recently added support for Fubo, a vMVPD that competes with traditional MVPD offerings. And that's on top of existing support for popular vMVPDs YouTube TV, Hulu + Live TV, and Sling TV.

Subsection(e) of Section 629 states that any rules adopted thereunder "shall cease to apply when the Commission determines that (1) the market for the [MVPDs] is fully competitive; (2) the market for [devices] used in conjunction with that service is fully competitive; and (3) elimination of the regulations would promote competition and the public interest."

Xumo devices singlehandedly satisfy the first two conditions, and the sunset of one-sided rules that unjustifiably impose compliance costs clearly would "promote competition and the public interest." All that is left is for the Commission to acknowledge – "determine," per the language of the statute – that which undeniably is true.

Consumer Preferences Steadily Shift to Streaming Video

During the second half of 2022, the percentage of U.S. households with a pay TV subscription (think: "cable") fell below half for the first time. When presented with the choice between accessing a specific show on a linear channel or a subscription video-on-demand (SVOD) service, consumers increasingly opt for the latter – and not just to avoid ads: younger Americans, in particular, "emphasize that SVOD is the place where they already watch shows most of the time." And speaking of SVOD, one analyst expects SVOD services to add 40 million new subscriptions in 2023 – an impressive feat given current economic conditions.

Indeed, each passing week seemingly provides additional evidence that consumers prefer their video streamed – and that, as a result, in 2023 no justification exists for regulations that single out traditional providers of video content. Far from gatekeepers, cable operators and other facilities-based Multichannel Video Programming Distributors (MVPDs) find themselves uniquely stymied by legacy rules predicated upon marketplace conditions that simply do not exist today.

In Comments and Replies filed in the 2022 Communications Marketplace Report proceeding, Free State Foundation scholars (1) documented the rapid consumer migration from traditional MVPDs to Internet-based alternatives, and (2) and argued persuasively that, consistent with its statutory responsibility to identify "laws, regulations, [and] regulatory practices [that]... pose a barrier ... to the competitive expansion of existing providers of communications services," the FCC should take swift steps to eliminate outdated and one-sided carriage- and equipment-related rules that constrain competition, arbitrarily pick winners and losers, and, ultimately and consequently, harm consumers.

However, as I pointed out in "On Video, the FCC's Competition Report Falls Short," a January 2023 Perspectives from FSF Scholars, the ensuing Report failed to articulate an appropriate deregulatory agenda in response to the markedly transformed video programming landscape that it described. (Keep in mind, too, that that Report focused on the years 2020 and 2021 – a lifetime ago given the pace at which video distribution is evolving.)

Going forward, Free State Foundation scholars will continue to highlight data points compelling Commission deregulatory measures that afford every participant in the vibrantly competitive video programming marketplace an equal opportunity to compete.

Commissioner O'Rielly Asks eBay and Amazon to Remove Fraudulent TV Devices

On Friday May 25, 2018, FCC Commissioner Michael O'Rielly sent a letter to eBay CEO Devin Wenig and Amazon CEO Jeff Bezos to warn them about certain manufacturers of video television set-top boxes who fraudulently place the FCC's trusted logo onto devices that have not been approved by the Commission's equipment authorization process. Despite proactive steps by both eBay and Amazon to reduce theft of intellectual property (IP) from their websites, pirated goods, such as these fraudulent set-top boxes, are still sold on both online marketplaces, putting consumers at serious risk and legitimate manufacturers at an economic disadvantage.

Commissioner O'Rielly requests that eBay and Amazon continue to remove devices that fraudulently bear the FCC logo and to provide the FCC with any additional information that will help combat IP theft and consumer fraud.

Thinking Things Through VI - #UnlocktheWordProcessors

As I said in my last post in this series, some things are harder to think through than others. But, like the last post, this one too is rather easy.

I begin again with the letter Public Knowledge President Gene Kimmelman sent on September 21 to congressional leaders in which he said this: “Contrary to claims of Hollywood and cable monopolies, the FCC’s apps proposal will promote consumer choice while protecting copyright.”

In my last post, I explained why, as a matter of first principle, Mr. Kimmelman’s claim that the FCC’s navigation proposal will protect copyright is wrong.

But there is another matter of first principle at stake as well, this one involving sound communications policy. Notice that Mr. Kimmelman refers, as he and other Public Knowledge staff almost invariably do, to “cable monopolies.” There must be a locked “macro” on the PK word processors that will not allow anyone to type “cable” without “monopolies” attached. Please: #UnlocktheWordProcessors.

I could make light of this monotonous coupling by saying it is “so 90ish,” as in the 1990s. But since, for the last several years, the FCC appears to be taking so many of its cues from Public Knowledge, this is serious business.

To the extent they ever did, cable operators no longer have a monopoly in the distribution of video programming, unless Mr. Kimmelman means to argue that what he calls “cable” constitutes a distinct video distribution product market because “cable” uses a distinct “cable” technology. If he means to argue this, it is an untenable position because, in today’s video marketplace, video distributors compete vigorously against one another employing various technological platforms.

For authority that there no longer are any “cable monopolies” I refer Mr. Kimmelman to – yep! – the FCC. In June 2015, in what the agency calls the Effective Competition order, the Commission finally adopted a rule presuming that local video markets, on a nationwide basis, are subject to “effective competition.” In announcing adoption of the competitive presumption, the Commission recited the dramatic changes that have occurred in the video marketplace since the FCC started regulating basic cable rates after passage of the Cable Act of 1992.

As the agency explained in a brief filed in the D.C. Circuit appeals court in February 2016, two decades ago, in most locations, a single cable operator often was the only purveyor of multichannel video service. But now, citing all the familiar market share figures, the Commission conceded – indeed, touted – in its appellate brief that there has been a “transformation” of the multichannel video marketplace, acknowledging that “consumers have alternatives to cable,” and “cable’s market share has sharply declined.”

If ever there were, there no longer is such a thing as a “cable monopoly,” and the Commission has acknowledged this obvious truth, even if Mr. Kimmelman won’t.

But the Commission has a very bad case of cognitive dissonance when it comes to its video device navigation proposal. In a competitive market like the video distribution marketplace – that is, one in which the market participants are presumed by the Commission to lack market power – there is no sound basis, as a matter of first principle, for proposing to extend the government’s regulatory reach, rather than retract it. This is especially so, as here, where the government’s proposed new regulation ultimately involves a government-designed technological mandate in a fast-changing, dynamic technological area.

The set-top devices, or now navigation apps, that the government proposes to design, and upon which it seeks to impose a standardized compulsory license with a nondiscrimination mandate, are merely complements to the overall video distribution services offered by various video providers. And, as you might expect in a market which the FCC has declared presumptively competitive, the video distributors, in fact, do compete in the provision of navigation devices and app offerings in order to further differentiate their services. Of course, this differentiation in response to changing consumer demand is an important reason there has been considerable innovation and investment with respect to video devices and apps in the past few years.

The Commission appears blind to the adverse impact on innovation and investment by video distributors that its proposal is likely to cause. Perhaps it doesn’t care.

In any event, even if Mr. Kimmelman and his Public Knowledge colleagues continue to refer to “cable monopolies,” the Commission should know better. As a last resort, it should read its own appellate brief in defense of its Effective Competition order.

Thinking Things Through V - The FCC, Copyrights, and Compulsion

Some things are harder to think through than others. But this one is rather easy.

As reported in the September 23 edition of Communications Daily [subscription required], on September 21, Public Knowledge President Gene Kimmelman sent a letter to congressional leaders in which he said this: “Contrary to claims of Hollywood and cable monopolies, the FCC’s apps proposal will promote consumer choice while protecting copyright.”

As I have explained at length elsewhere, despite all the protestations to the contrary, the FCC’s proposal, including the latest iteration as best conjectured through selective blog and “fact sheet” snippets thus far publicly disclosed, almost certainly will threaten the integrity of copyrights and the traditional right of copyright holders to determine with whom to deal and on what terms. Again, despite protestations to the contrary, the FCC is proposing a compulsory license. Regardless of whatever label the FCC eventually chooses to place on its proposed mandate, as Mr. Kimmelman acknowledges, the agency’s diktat “would simply ensure nondiscriminatory treatment of programmers and device and platform vendors.”

You can play words games as long as you like, but the FCC’s mandate to “simply ensure” nondiscrimination will be compulsory and it will be a license. Hence, a compulsory license.

I want to add that I have known Gene Kimmelman for many, many years, and I respect him and consider him a friend. I hope he feels likewise. For me, what’s important are not the personalities, and I try hard never to question a person’s motives for advocating a position. That’s certainly true here.

What’s important to me is getting policy right and acting in accordance with the rule of law. There’s a reason that the Founders included the Intellectual Property Clause in the Constitution and, uniquely, charged the federal government with securing this particular form of property. The reason has much to do with allowing creators of all sorts, whether they reside in Hollywood or Podunk, to realize the fruits of their labors, and through the medium of contracts freely negotiated, to realize the returns on their innovations and investments.


Absent a very compelling reason – which doesn’t exist in this case – a federal agency, here the FCC, should not act in a way that has the effect of derogating copyrights.

Hulu Hopes To Grab Pay-TV Cord-Cutters

On May 1, 2016, Hulu announced a new service aimed at cord-cutters. The unnamed subscription service would stream feeds of popular broadcasts and pay-TV channels, making the company a competitor to traditional pay-TV providers. Walt Disney Co. and 21^st Century Fox, co-owners of Hulu, are working on agreements to license many of their channels for the platform. Comcast Corporation, another co-owner of Hulu, has yet to announce if it will participate in the service with its NBC programming.

Pay-TV providers are developing streaming services to increase their number of consumers. Dish Networks, Comcast, and AT&T-DIRECTV all offer curated streaming programs. Because one-in-seven Americans are “cord-cutters,” meaning they no longer have a traditional pay-TV subscription, online offerings allow pay-TV providers to gain back some of their former subscribers.

Hulu’s new service is not an attempt to regain former subscribers. Instead, it hopes to grab cord-cutters from the entire video marketplace. Hulu’s service could become the standard for streaming live television because it would not require a specific Internet service provider, and because it could pull programming from three of the biggest content companies - Disney, Fox, and NBC.

This transition from pay-TV to streaming services within the video marketplace is a response to the increasing number of cord-cutters. There is no doubt that the video market is moving online, but the FCC recently proposed to lock in old technology and add unnecessary regulations to set-top boxes. These regulations would not only create costs that could stifle this innovative transition, but they would allow 3^rd parties to reap the benefits of content creators’ intellectual property rights.

See our infographic on the FCC’s proposal and our comments submitted to the FCC regarding expanding consumers’ video navigation choices and commercial availability of navigation devices.

"Walking Dead" Producer Fears FCC's Set-top Box Proposal

Today, “Walking Dead” producer Gale Ann Hurd published an op-ed in USA Today expressing concern over the FCC’s recent proposal to regulate set-top boxes. Ms. Hurd explains that the FCC’s proposal would require set-top boxes to show and prioritize illegal content alongside legal content. She says the proposal “will make piracy as easy and dangerous in the living room as it is on laptop and mobile devices.”

Ms. Hurd hits the nail on the head. In a February 2016 blog, FSF Senior Fellow Seth Cooper stated that the FCC’s proposal to “unlock the box” would actually unlock copyright protections for video content.

Additionally, in a February 2016 Perspectives from FSF Scholars entitled “FCC’s Cognitive Dissonance Leads to Regulatory Policy Run Amok,” FSF President Randolph May revealed that in June 2015 the Commission found local video markets to be effectively competitive, but now, just seven months later, the FCC proposes regulations. Despite what FCC Chairman Tom Wheeler claims about the video device market, a look at set-top box prices shows no monopoly power. In fact, as we showed in a recent infographic, consumer choices in the video market continue to grow because of market-driven innovation and technological advances.

As Ms. Hurd states in her op-ed, most people agree that piracy is a serious problem. And if you can agree that piracy is a serious problem, then it should be obvious that the FCC should not adopt regulations that would enable the posting and dissemination of illegal content.

Content Availability in U.S. at an All Time High

On March 17, 2016, SNL Kagan released a new study entitled “U.S. Availability of Film and TV Titles in the Digital Age,” which quantifies the availability and growth of legitimate digital offerings of film and TV series in the U.S. based on a review of 33 major online video on-demand distributors and 14 TV everywhere on-demand services.

Key findings from the study include:

• 98% of premium films and 94% of premium TV series were digitally available on at least one of the reviewed online services.

• 97% of premium films were digitally available on at least one of the reviewed online video on-demand services – up from 94% in 2013. The report also found that 93% of premium TV series were digitally available on at least one of the reviewed online video on-demand services – up from 85% in 2013.

• On TV Everywhere on-demand services, which provide online access via an authenticated paid subscription, 96% of premium films and 82% of premium TV series were digitally available on at least one of the services reviewed.

• 95% of premium films and 84% of premium TV series were digitally available on at least five of reviewed online services. 

Additionally, a new study from FX Networks found that the number of scripted series has increased 94 percent from 2009 to 2014. Consumers have many choices regarding video devices and online video services. It is pretty clear that there is more video content available for consumers today than ever before, despite FCC Chairman Tom Wheeler’s recent statement that “consumers essentially have no choices.” (See FSF’s new infographic on the FCC’s set-top box proposal.)

The findings from the SNL Kagan study are important when considering the misguided regulations proposed by the FCC to add mandates to set-top boxes and lock in old technology. It is clear from this study that the video market is moving online rapidly, but the FCC’s proposal could stifle this innovative transition, harming the creative process and the growth in consumer choice.

The United States is a leader in providing strong IP rights protections for the creative community. This has helped create the dynamic, growing market for video services, but the FCC’s proposal could reverse this progress by jeopardizing the protection of copyrighted content.

The FCC Should NOT Impose New Video Device Mandates!

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FSF’s President May Discusses FCC’s Set-Top Box Proposal on TPA Podcast

I participated on a Taxpayers Protection Alliance (TPA) podcast on March 8, 2016. I explained why the FCC's new rulemaking proposal to establish a new government-mandated TV set-top box, also known as AllVid, is problematic in so many different ways for consumers and the video marketplace.

TPA is a non-profit non-partisan organization dedicated to educating the public on the government’s effects on the economy. I was grateful to have the opportunity to participate with TPA on the podcast, and I congratulate TPA on its own important work.